and strategic progress update Half year ended 30 June 2018 1 - - PowerPoint PPT Presentation

1 Results Presentation August 2018

Half year ended 30 June 2018

1H18 results and strategic progress update

1 AUGUST 2018

2 Results Presentation August 2018

Introduction

Chris Weston CEO

3 Results Presentation August 2018

Agenda

Headlines 1H18 results review Strategic priorities Financial performance drivers Closing remarks

4 Results Presentation August 2018

Headlines

Financial results

 Encouraging H1 results  Full year guidance unchanged

Strategic progress

 Our 2015 strategy has evolved to reflect changing markets  Execution of our strategy has strengthened the Group’s foundations and is

beginning to drive growth

 Detailed plans, focused on operating margin and capital efficiency and

supported by cost savings of £50m, to deliver improved financial returns

 We expect to deliver ROCE in the mid teens in 2020, with potential for

further improvement thereafter

5 Results Presentation August 2018

1H18 results review

Heath Drewett CFO

6 Results Presentation August 2018

Group summary

 Good underlying growth

in revenue and operating profit

 No exceptional items in

2018 (2017: £10m)

 Effective tax rate of 31%  Dividend in line with 2017

Encouraging H1 results

Movement £m pre-2017 exceptional items 1H18 1H17 CHANGE CHANGE

excluding pass-through fuel and currency

Revenue 857 779 10% 14% Operating profit 76 79 (4)% 8% Net interest expense (17) (16) (8)% Profit before tax 59 63 (7)% Taxation (18) (18)

• Profit after tax

41 45 (10)% Diluted earnings per share 15.85 17.88 (11)% Dividend per share 9.38 9.38

• Operating margin

9% 10% (1)pp ROCE 11% 12% (1)pp

7 Results Presentation August 2018

Movement

pre- 2017 exceptional items

1H18 1H17 CHANGE CHANGE

excluding currency

Revenue (£m) 386 307 26% 32% Operating profit (£m) 40 14 169% 192% Operating margin 11% 5% ROCE (rolling 12 month) 16% 8% Fleet capital expenditure (£m) 26 24

Business performance

% REVENUE BY SECTOR 1H18

Business services & construction Petrochemical & refining Oil & Gas Utilities Events Manufacturing Mining Other

19% 17% 12% 11% 9% 7% 5% 20%

UTILISATION

at 30 June (MW)

50%

REVENUE

(% OF GROUP excl. pass-through fuel)

Rental Solutions

Strong growth and improved margins

1H18 1H17 61% 52%

8 Results Presentation August 2018

39% 16% 11% 10% 8% 7% 2% 7%

Business performance

Movement

pre- 2017 exceptional items

1H18 1H17 CHANGE CHANGE

excluding currency

Revenue (£m) 219 212 3% 15% Operating profit (£m) 23 31 (24)% (15)% Operating margin 11% 14% ROCE (rolling 12 months) 10% 10% Fleet capital expenditure (£m) 27 14

% REVENUE BY SECTOR 1H18

Oil & Gas Events Mining Business services & construction Utilities Manufacturing Petrochemical & refining Other

29%

REVENUE

(% OF GROUP excl. pass-through fuel)

Power Solutions Industrial

Profit impacted by Middle East headwinds

UTILISATION

at 30 June (MW) 1H18 1H17 70% 69%

9 Results Presentation August 2018

Business performance

Movement

pre- 2017 exceptional items & excluding pass-through fuel

1H18 1H17 CHANGE CHANGE

excluding pass- through fuel and currency

Revenue (£m) 163 218 (25)% (15)% Operating profit (£m) 14 36 (62)% (55)% Operating margin 8% 17% ROCE 7% 16% Fleet capital expenditure (£m) 34 77

21%

REVENUE

(% OF GROUP excl. pass-through fuel)

Power Solutions Utility

Performance reflects known contract off-hires

 This segment now includes only Utility customer projects

UTILISATION

at 30 June (MW) 1H18 1H17 65% 75%

10 Results Presentation August 2018

Cash flow

 Working capital outflow of £68m  Capital expenditure reduced by

£33m as we increase our focus on utilisation

 Net debt/EBITDA of 1.4x

£m 1H18 1H17 EBITDA 224 230 Working capital (68) (51) Cash flows relating to prior period exceptionals (4) (10) Other 8 15 Operating cash flow 160 184 Tax (33) (33) Net interest (18) (17) Acquisitions (33) (28) Purchase of fixed assets (95) (128) Other fixed asset movements

• 4

Free cash flow (19) (18) Dividends (45) (45) Changes in equity (7)

• Net cash flow

(71) (63) Exchange (18) 29 Movement in net debt (89) (34) Net debt (741) (683)

11 Results Presentation August 2018

Working capital performance

In recent periods receivables have been the key driver, with some improvement in payables

WORKING CAPITAL BREAKDOWN (£m)

• 600
• 400
• 200

200 400 600 800 1,000

H118 FY17 H117 FY16

Inventory Receivables Payables

£247m £656m £(299)m £(361)m £238m £736m £(410)m £(346)m £232m £770m £244m £740m

12 Results Presentation August 2018

Actions in place to tackle receivables

 Monthly cash collection targets by region (and

customer on major projects)

 Augmented and structured stakeholder

engagement

 Sales agent effectiveness measured and

changes made

 New regional senior positions created (above

project managers) to increase focus and provide escalation path

 Tighter enforcement of contract provisions,

including application of late payment penalties

Power Solutions

 Monthly billing and collection targets by

region

 Regular execution review of top debtors

and unbilled accounts to agree remedial actions

 Temporary resources added to clear

unbilled backlog and support collections

Rental Solutions

13 Results Presentation August 2018

Improving performance as our actions begin to take effect

Utility – Invoicing/receipts performance

POWER SOLUTIONS UTILITY ($m)

10 20 30 40 50 60 70 80 90

Jan Feb Mar Apr May Jun

Invoicing Receipts

2018

14 Results Presentation August 2018

Steady improvement since the close of 2017

Rental Solutions – Trade receivables performance

Month by month improvement across Rental Solutions, with improved collections making inroads into the overall trade receivables position

TRADE RECEIVABLES – INCLUDING UNBILLED ($m)

0% 5% 10% 15% 20% 25% 30% 50 100 150 200 250 300

H117 FY17 Jan Feb Mar Apr May Jun 2018

Trade receivables/revenue %

15 Results Presentation August 2018

Inventory

The next area of focus

 Clear target to reduce inventory levels in 2018  Central team established to review and

approve all new orders (to confirm the ‘need’)

 Safety stock levels set by the central team  Identification and movement of excess

inventory across the regions to meet business needs

 Centrally managed global buyback procedure

with key suppliers

 Regular stock counts and write-off reviews

Power Solutions

 Recently begun inventory system regional roll-out  System automation of stock categorisation (9 box

definitions: fast moving, slow moving, non moving etc.) to enable greater visibility and support inventory sharing

 Creation of virtual inventory sharing warehouse for

depots/regions to identify stock availability prior to placing new orders

 Consignment stock arrangement established with

key supplier

 Scrappage/third party sale process for surplus

items, where no supplier buyback option exists

Rental Solutions

16 Results Presentation August 2018

On track to deliver our 2018 guidance

 Growth in Rental Solutions and Industrial expected to offset Utility headwinds

in the full year

 Expected effective tax rate of 31%  Full year fleet capex down c.10% on prior year  Working capital improves to small inflow in H2  Net debt/EBITDA to reduce to 1.2 – 1.3x

2018 PBT expected to be in line with 2017, excluding currency effects

17 Results Presentation August 2018

Strategic priorities

Chris Weston CEO

18 Results Presentation August 2018

2015 strategic priorities: A reminder

CUSTOMER TECHNOLOGY EFFICIENCY

• Tailor sales and service channels
• Focus on key sectors
• Pursue adjacencies
• Evaluate bolt-on M&A opportunities

Priority

• Work with our strategic partners to develop market

leading products

• Strengthen and expand strategic partnerships
• Reduce the overall cost of power for our customers

Priority

• Streamlining our cost base
• Optimising deployment of resources
• Improving processes and systems

Priority

19 Results Presentation August 2018

Group performance held back

We have faced significant challenges as we have executed our strategy

50 100 150 200 250 300 350

2014 2017

NEGATIVE DRIVERS

 Repricing and off-hires of

legacy Utility contracts

 Customer liquidity increasing

• utstanding receivables

 Impact of oil price fall on North

American oil & gas sector

Rental Industrial Utility

OPERATING PROFIT (£m)

20 Results Presentation August 2018

Reviewing our strategy

 Progress in the strategic priorities has built a firm foundation and is

beginning to drive growth

 Re-examined our strategy, the markets we operate in and the impact of

renewables and storage

 Markets have evolved and our strategy has evolved with them  Implementing detailed plans for the continued execution of the strategy  Determined revised financial expectations

Comprehensive, business led exercise, supported by external consultants

21 Results Presentation August 2018

Our approach to the markets

We have three inter-related, but distinct businesses Rental Solutions Power Solutions Industrial Power Solutions Utility

 Focus on high value key

sectors

− Deliver sector customer

needs

 Build sector specific

capability

− Technical expertise − Sales approach

 Improve cost position

 Focus on natural

resource & industrial sectors

 Low cost operating

model

− Optimise fleet

allocation and

• perating model

− Efficient hub & spoke

depot network

 Focus on utilities in

emerging markets

− Flexible, innovative

solutions to infrastructure issues

 Lowest cost of energy

− Efficient technology

and operations

22 Results Presentation August 2018

Our evolved strategy

We have four clear strategic priorities

Being particular about the sectors we target Offering specialist solutions Being simple to do business with

Customer focus

Developing competitive configurable products Smarter use of connected systems & data analytics Integrating renewable & storage technology

Technology investment

Being mobile & modular Getting the very maximum out of our assets Striving for the most competitive cost base

Capital efficiency

Living Always Orange Nurturing our full potential Staying safe and professional at all times

Expert people

23 Results Presentation August 2018

Customer focus

Being particular about the sectors we target Offering specialist solutions Being simple to do business with

Customer focus

 Continued focus on key sectors

− Focus and technical capability: increase in higher value,

complex solutions

− Hybrid solutions (off grid, mining)

 Sales & marketing discipline and process enhancements

− Segmentation and channel development (telesales and

ecommerce)

− Real time pricing governance

 System investment to improve customer experience

− End to end systems being deployed

 Remote monitoring and data analytics

− Improved customer service and product development

TRANSLATING PRIORITIES INTO DETAILED PLANS

24 Results Presentation August 2018 24 Results Presentation March 2018

25 Results Presentation August 2018

TRANSLATING PRIORITIES INTO DETAILED PLANS

Technology investment

 Continued focus on reducing the total cost of energy

− Fuel efficiency, hybrid solutions and emissions

 Complex sector specific applications  Remote monitoring platform and data analytic capability  Hybrid solutions and storage integration

− Integrating renewables, storage and thermal − Deploy to existing fleet/sites to improve efficiency and

reliability

Developing competitive configurable products Smarter use of connected systems & data analytics Integrating renewable & storage technology

Technology investment

26 Results Presentation August 2018

TRANSLATING PRIORITIES INTO DETAILED PLANS

Capital efficiency

 Centralised fleet management to drive utilisation  Remote monitoring and data analytics

− Reduce maintenance costs − Improve utilisation

 Deploy Rental Solutions systems into Industrial

− Back office and process efficiencies

 Cost reduction program to deliver £50m of savings  Reduction in working capital

Being mobile & modular Getting the very maximum out of our assets Striving for the most competitive cost base

Capital efficiency

Cost focus is key in Power Solutions Utility Addressing receivables and costs to ensure competitiveness

27 Results Presentation August 2018

Improving outlook into 2019 and beyond

 Comprehensive business led review now completed  We are already well advanced to respond to changing demand

− Customer focus and systems − Technology

 Focus on operational excellence as well as growth  Detailed plans to improve capital efficiency

− Fleet asset investment − Working capital

 Culture change driving an improved commercial understanding

• f what delivers value

Expect to deliver ROCE in the mid-teens in 2020

28 Results Presentation August 2018

Financial performance drivers

Heath Drewett CFO

29 Results Presentation August 2018

Plans to improve all elements

Improving ROCE

ROCE is our key measure of performance

OPERATING PROFIT

 Volume growth  Pricing  Operational efficiency

CAPITAL EMPLOYED

 Working capital  Capital investment  Utilisation

30 Results Presentation August 2018

Growing returns: Rental Solutions

Continued improvement

KEY DRIVERS:



Sector focus and specialisation



Higher value, complex solutions



Remote monitoring & new systems



Inventory systems



Utilisation



Introduce e-commerce

Operating profit Working capital Fixed assets

16%

2020 1H 18 1 2 3 4 5 6

4 6 3 2 1 5

31 Results Presentation August 2018

Growing returns: Industrial

KEY DRIVERS:



Sector focus and specialisation



Higher value, complex solutions



Remote monitoring & new systems



Inventory management



Utilisation

Operating profit Working capital Fixed assets

10%

2020 1H 18

4 3 2 1

Continued improvement

5

1 2 3 4 5

32 Results Presentation August 2018

Plans to improve all metrics

Rental & Industrial actions

GROWTH AND PRICING

 Embedding our dedicated sector sales resources  Focus on specialty products and more complex solutions to support improved pricing  New systems to enable real-time pricing and improved governance  Introduction of e-commerce platform and telesales to service more transactional market  Hybrid solutions provide new growth opportunities

OPERATIONAL EFFICIENCY

 New systems to support the customer journey and improve efficiency  Remote asset monitoring to drive down unplanned maintenance costs  Introduction of data analytics to reduce costs of regular servicing  Global fleet management

Volume growth, improved pricing and operational efficiency

33 Results Presentation August 2018

Growing returns: Utility

KEY DRIVERS:

Sales discipline to drive operating profit with focus on margin, not growth Cost reduction program Billing & collections under spotlight and part of sales process Inventory management and systems investment Optimising utilization, capital expenditure discipline

Set to improve returns through self-help measures

Operating profit Working capital Fixed assets

7%

2020 1H 18

3 1 5 2 4

1 2 3 4 5

34 Results Presentation August 2018

Plans to improve all metrics

Utility actions

REDUCE WORKING CAPITAL ROFIT

 Continue actions already in place (referenced earlier)

DRIVE UTILISATION

 All capital expenditure requires CEO/CFO approval  New product build programme limited to G16 upgrades in the short term  Global fleet management and deployment  Group Operations Council established to oversee and govern fleet operations  Asset monitoring to improve site efficiency and remove fleet redundancy  Surplus fleet transfers to Rental and Industrial Solutions to support volume growth

REDUCE COSTS

 Planned maintenance cost reduction through introduction of condition-based maintenance regimes  Procurement savings through extension of spare parts supplier base  Optimisation of fleet logistics and project manning  Review regional office and support function locations  Improve sales productivity through training and development

Capital efficiency and cost reductions

35 Results Presentation August 2018

Improving Group returns

Generating mid-teens returns in 2020

Operating profit Working capital Fixed assets

2020 1H 18 Mid-teens %

11%

RENTAL & INDUSTRIAL

 Operating profit improvement the

key driver

 Some uplift in working capital and

fixed asset ratios

UTILITY

 Broader base of improvement:

− Cost reductions − Working capital − Fixed asset utilisation

 Self-help measures are key

36 Results Presentation August 2018

Closing remarks

Chris Weston CEO

37 Results Presentation August 2018

Summary

 The first half results are encouraging: we are on track to achieve our full year

guidance

 Our 2015 strategy has evolved to reflect changing markets  Execution of our strategy has strengthened the Group’s foundations and is

beginning to drive growth

 Detailed plans, focused on operating margin and capital efficiency and

supported by cost savings of £50m, to deliver improved financial returns

 We expect to deliver ROCE in the mid teens in 2020, with potential for further

improvement thereafter

We have built a strong platform to improve returns

38 Results Presentation August 2018

Aggreko is a customer focused specialist provider of power, temperature control and energy services on a global basis. These services are based on modular and mobile equipment

• perated on a digital platform with a market leading

integration capability.

38 Results Presentation March 2018

39 Results Presentation August 2018

Appendix

40 Results Presentation August 2018

Foreign exchange impact

Note: UAE Dirhams included within US Dollar as it is pegged to the US dollar; Argentinian Peso includes Power Solutions Utility contracts which are pegged to the US Dollar but paid and reported in Argentinian Pesos.

FX RATES REVENUE (£m)

FY17 average July 2018 FYF average FY17 actual FY17 Restated at July 2018 FYF average rates Variance % Variance US Dollar 1.29 1.35 814 780 (34) (4)% Euro 1.14 1.13 209 211 2 1% Australian Dollar 1.68 1.78 77 73 (4) (6)% Argentinian Peso 21.36 33.01 64 42 (22) (35)% Brazilian Real 4.12 4.82 216 185 (31) (15)% Canadian Dollar 1.67 1.74 23 22 (1) (4)% Russian Rouble 75.19 82.31 76 69 (7) (9)% Other 219 207 (12) (5)% Total revenue 1,698 1,589 (109) (6)% Total operating profit 224 202 (22) (10)%

41 Results Presentation August 2018

Disclaimer

The information contained in this presentation has largely been extracted from the Results Announcement for the six months ended 30 June 2018. This presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of Aggreko speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis

• n which they were prepared.

This presentation is published solely for information purposes. The distribution of this presentation in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and

• bserve, any applicable requirements.

All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere.